The world’s fourth-largest oilfield services company has
slumped 53 percent since March 2011, when it disclosed income-
tax errors and weaknesses in its internal controls. The decline
left Geneva-based Weatherford valued last week at 5.1 times its
estimated 2013 earnings before interest, taxes, depreciation and
amortization, a cheaper multiple than 90 percent of similar-
sized peers in the oil and gas services industry, according to
data compiled by Bloomberg.

With Weatherford planning to submit restated financial
statements soon that will put the tax issues behind it, Dahlman
Rose & Co. said the $9.2 billion company could lure acquirers
with its low valuation, global presence and product lines.
Halliburton Co. (HAL) may be attracted by Weatherford’s leading
position in artificial-lift pumps used to draw oil out of the
ground, said Capital One Financial Corp. General Electric Co. (GE),
which built an oil and gas services division through
acquisitions, also could be a buyer, according to Oracle
Investment Research.

“We are closer to the end” of the accounting issues,
bolstering Weatherford’s allure as a takeover candidate, James Carroll, a fund manager for Loomis Sayles & Co. in Bloomfield
Hills, Michigan, said in a telephone interview. “Fundamentally,
the company has some very attractive businesses that would be of
interest.”

Drilling Equipment

Christine Mathers, a spokeswoman for Weatherford, declined
to comment when asked about the prospects of the company
becoming a takeover target.

Weatherford provides a variety of services and equipment to
drill and complete wells for producing oil and gas. The company
was incorporated in Bermuda and run from Houston until 2009,
when it relocated to Geneva for a more favorable tax rate.
Weatherford is listed in the U.S. and Switzerland.

Generating most of its revenue from outside the U.S. and
Canada, Weatherford is the world’s largest provider of a service
known as artificial lift, which uses pumps, plungers, gas-
injection and other methods to boost the flow of oil in a well
that has lost pressure over time.

Material Weaknesses

Weatherford disclosed in March 2011 that it identified
“material weaknesses” in its accounting system that the
company said would result in adjustments of about $500 million
to its financial statements for the periods from 2007 to 2010.
Weatherford has since said it plans to file amended financial
results for 2011 and must still finalize reports for the second
and third quarter of this year.

After naming a new chief financial officer and putting in
new accounting procedures, Weatherford has said it will release
final revisions to past numbers no later than Dec. 17.

Weatherford’s market value was as high as $19.8 billion in
the weeks before its accounting disclosure, and has since
plunged by more than half. At last week’s closing price of
$10.99 in New York, the company was valued at 5.1 times
estimated Ebitda for 2013, including net debt, data compiled by
Bloomberg show. That’s 26 percent less than the median multiple
of 6.9 times among oil and gas services, equipment and rig-
rental companies with a market capitalization greater than $5
billion, the data show.

‘Unusually Depressed’

“The stock has been unusually depressed lately because
it’s had to restate taxes,” James Crandell, a New York-based
analyst at Dahlman Rose, said in a phone interview. The
accounting cloud “has hurt it significantly, and it’s a very
big deal that it’s now out of the way.”

Today, Weatherford shares fell 0.6 percent to $10.93.

The resolution of Weatherford’s tax issues, combined with
the low valuation, could make the company vulnerable to a
hostile bid from suitors attracted to its range of products and
footprint in countries around the world, Crandell wrote in a
Dec. 5 note.

Luke Lemoine, an analyst at Capital One in New Orleans,
said Halliburton could be attracted by Weatherford’s leading
position in artificial-lift work. That business generates steady
profits, compared with the more volatile results from equipment
and services related to hydraulic fracturing, which caused a
number of service companies to miss estimates lately, he said.
Halliburton, the world’s largest provider of fracking services,
has a market value of $31.3 billion.

GE Push

Tara Mullee Agard, a spokeswoman for Houston-based
Halliburton declined to comment on whether the company would
consider a bid for Weatherford.

GE also could be interested in Weatherford to bolster its
position in the oil-services industry and compete more directly
with Schlumberger, said Laurence Balter, who helps manage $100
million, including Weatherford shares, at Oracle Investment
Research in Fox Island, Washington.

GE, the conglomerate with a market value of $225 billion,
built up its oil and gas business with the help of acquisitions
in a six-month period ending in March 2011. Purchases included
Dresser Inc. for $3 billion and the well-support division of
John Wood Group Plc for $2.8 billion. In July, the company
projected the unit will have $15 billion of revenue this year.

In Pieces

“It wouldn’t be that large for GE in general, but for the
oil and gas division it would be a great way to really shoulder
against Schlumberger,” Balter said in a phone interview. “The
valuation is there; the current market prices are begging for an
offer.”

Sean Gannon, a spokesman for GE Oil and Gas in New York,
said the company doesn’t comment on market speculation. GE Chief
Executive Officer Jeffrey Immelt told analysts in September that
the company is focused on acquisitions of $1 billion to $3
billion. “We like our execution on these focused
acquisitions,” he said.

James Wicklund, an analyst at Credit Suisse AG in Dallas,
said it’s unlikely Weatherford will receive takeover offers.
Instead, buyers may be drawn to some of Weatherford’s parts,
such as its artificial-lift division or rental-tools business.

“There’s a long list of people who would be interested in
the pieces,” Wicklund said. “But keep in mind, the pieces they
want most are the pieces Weatherford is going to be least
interested in selling.”

Debt Load

While Weatherford’s valuation is low, a prospective buyer
may want to wait to make a bid until the company improves
operations and reduces its debt, said Andrea Sharkey, an analyst
for Rye, New York-based Gabelli & Co., a unit of Gamco Investors
Inc., which oversees about $36 billion and owns Weatherford
shares.

Weatherford’s $7.3 billion in long-term debt is equivalent
to more than two-thirds its market value.

Still, for a potential buyer convinced the company has put
its accounting issues behind it, Weatherford could offer good
value, said Joe Hill, an analyst at Tudor Pickering Holt & Co.
in Houston.

“Weatherford suffers from a whole lot of ‘restatement-
itis’ that should give any buyer a pause,” Hill said in a phone
interview. “But the price is right. It’s just whether or not
you believe the numbers.”